David Siemer of Siemer Associates and Siemer Ventures.
I had a great conversation recently with David Siemer of Siemer & Associates, a boutique investment bank and early-stage venture capital investor — Siemer Ventures — that's based right here in Southern California. The merchant banking side of their business is "new" old school investment banking, centered on raising capital for clients and providing advisory services. In other words, investment banking the way it used to be, before trading of the sort practiced by the Big Boys — Goldman Sachs, Morgan Stanley — became a profit-driver.
Not surprisingly, David Siemer wanted to get into venture capital, as well. What's interesting about this part of the business, which focuses on digital media, is the firm's bullishness on Asia and India. Siemer Ventures was started in 2007 and currently has its main office in Santa Monica, which is beginning to re-establish the "Silicon Beach" critical mass of tech companies that we first saw back before the dot com crash. For what it's worth, New York is also picking up steam. Silicon Valley isn't the only place to go for venture funding anymore. (Not that it ever was, but it's always been easy to get that impression.)
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The National Debt Clock, a billboard-size digital display showing the increasing US debt, is seen on the corner of Sixth Avenue and West 44th Street on August 1, 2011 in New York City.
Paul Krugman does another one of his simple, straightforward Econ 101 columns in which he helpfully ridicules the idea that we're headed down a debt-paved road to ruin. He zeroes in on the tendency of commentators to compare the finances of families to the finances of governments:
First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.
Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.
This was clearly true of the debt incurred to win World War II. Taxpayers were on the hook for a debt that was significantly bigger, as a percentage of G.D.P., than debt today; but that debt was also owned by taxpayers, such as all the people who bought savings bonds. So the debt didn’t make postwar America poorer. In particular, the debt didn’t prevent the postwar generation from experiencing the biggest rise in incomes and living standards in our nation’s history.
AP Photo/Andy Wong
At the New York Times, Paul Krugman turns his attention to China. Simply put, the Middle Kingdom could be the next domino to fall — after the U.S. financial crisis an the ongoing eurozone crisis — in what now looks like a pitched global battle between regulated finance and finance that, if not purely criminal, isn't exactly above-board.
Krugman zeroes in on the big difference between limited consumer spending in China, surging investment spending, and our old friend, real estate:
Do we actually know that [Chinese] real estate was a bubble? It exhibited all the signs: not just rising prices, but also the kind of speculative fever all too familiar from our own experiences just a few years back — think coastal Florida.
And there was another parallel with U.S. experience: as credit boomed, much of it came not from banks but from an unsupervised, unprotected shadow banking system. There were huge differences in detail: shadow banking American style tended to involve prestigious Wall Street firms and complex financial instruments, while the Chinese version tends to run through underground banks and even pawnshops. Yet the consequences were similar: in China as in America a few years ago, the financial system may be much more vulnerable than data on conventional banking reveal.
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A Chinese flag hangs next to a new development under construction on the busy Nanjing Road shopping street in Shanghai, China.
It's not a trivial question. This is Douglas Hervey, from the Harvard Business Review blog:
In the United States, disruptive innovation has harmed a few but benefited many. In China, top-down capitalism has benefited a few but harmed many. An absence of disruptive innovation and entrepreneurship is suffocating China's future growth potential. The future of that growth potential will depend in large part on whether China suppresses or unleashes its would-be disruptive entrepreneurs.
Hervey says that the Chinese are facing a "middle income trap — losing their competitive edge in labor-intensive industries and not yet gaining new sources of growth from innovation." So does this mean that China won't become the economic powerhouse we might once have expected?
It depends on how much faith you place in innovation. And here's why you should place a lot in it: because innovation really has no upper limit. More traditional contributors to GDP do. When an economy extracts as much growth as it can from some established process, it starts to outsource that process to a region where labor costs are cheaper. Or it fires up the innovation engine to make the process better — or replace the product in question with something better.
My latest appearance on "America Now with Andy Dean," this time to talk about yesterday's relatively positive economic news, which caused the Dow to rise almost 500 points. As always, a lot of fun to go back and forth with Andy and a good chance to summarize my DeBord Report post from Wednesday about the eurozone crisis, central banks, the impending jobs report, housing data, and whether China will be able to hold its own economy together.
I'm on at about the 31:00 mark. Enjoy!